Guest Post: What’s Wrong with Philanthropy (And How We Can Fix It)

There’s a great TED talk (here) that got me thinking. In it, Dan Pallotta – who essentially created the multi-day charitable event industry – argues that the way we judge charities is wrong. There’s an obsession with keeping overhead low and an understanding that salaries for those in charge should be kept to a minimum. After all, they’re working for charity. But this isn’t the best way to succeed. When a business wants to grow, society understands that it’s necessary to reinvest its earnings into creating more earnings. It’s worth hiring the best leaders (even with high pay) because they bring more value than they cost. And it shouldn’t be any different in the non-profit sector. The best way to raise more money is to reinvest a big portion of what they’ve earned so far. Pallotta’s charity events, despite comparatively high overhead, have grown exponentially faster than others and have, as a result, raised a much higher overall dollar figure. And that’s what matters, right?

Okay, I’m convinced.

But then I think about if one of the charities that I give money to told me that their CEO takes a big chunk of the proceeds and a majority of the rest goes towards marketing to get more donations and it just feels… wrong. I don’t want my money going towards overhead.

So: either I’m being irrational or there’s a piece of the equation that I’m missing.

Pallotta establishes – and I agree – that the best way for a charity to grow and raise more money in the long term is to reinvest their profits. Yet I still don’t feel comfortable donating to charities that operate in this way. Is that a contradiction? I’m not sure it is. Not necessarily. If my goal in giving to charity is to maximize the charity’s overall proceeds then yes, it’s a contradiction. But that isn’t my goal.

Let’s step back for a second: If I give $100 to charity and they reinvest all of that money to convince my neighbor to donate $101, is that a good thing? There’s been a net drain on society of $201, yet the charity only has $101 to show for it. That’s not good. I don’t feel like that was money well spent.

Compare that to a company that does the same thing. If I spend $100 on a new gadget and they reinvest all of that money to convince my neighbor to buy the same gadget for $101, is that a good thing? I’d argue that it is. My neighbor got something that he values at over $101 (otherwise he wouldn’t have bought it) and the company made additional revenue. Sure, we’re talking about small numbers so it seems insignificant, but it’s clear that everyone benefitted.

So what’s the difference???

It’s the fundamental problem with philanthropy today: When you give to charity, you are trading your money for the feeling that you’re helping.

That’s it.

And that leads to the societal beliefs that overhead and salaries should be low, and all the donations should go directly to helping the cause. Because, if they don’t, then the person donating didn’t get their end of the bargain. Their money didn’t help the cause.

When a charity spends $1 million on marketing – even if it has a positive ROI and generates $2 million in donations – that’s $1 million of contributions from people who gave money to help a cause and didn’t. Or, phrased another way, $3 million was given to help a cause and created only $2 million in real change.

In economics, we talk about growing the pie. And Pallotta’s speech assumes he can follow that logic: it’s worth reinvesting because it grows the pie. But donating to charity isn’t growing the pie, it’s just shifting wealth around. It’s a one-way transaction. So a reinvestment into getting more people to donate isn’t growing the pie the way reinvesting in a business would, it’s just a net loss for the sake of shifting the wealth around in a more favorable way.

So let’s recap quickly: Pallotta’s logic is flawed because a bigger overall dollar figure isn’t all that matters when people are giving out of sympathy. The best example is imagining a charity that reinvests so much into good marketing that they raise $1 trillion dollars. But only $1 billion of that money actually goes to help. They’ve created a huge bottom line, but because the cost of that bottom line was so massive (and the people giving didn’t get anything of value in return) it isn’t worth it. Donating to charity is a transaction where you are giving money in exchange for being able to help. And when the majority of those giving money don’t get to see their dollars put towards good, it doesn’t matter how useful that money was in creating more donations. It’s an overall societal loss.

So how can we fix this?

We need to change the way we see philanthropy. Businesses operate on the principle that they can provide more value than their costs of producing that value. In other words, they create transactions where both parties selfishly benefit and there’s profit leftover.

Why can’t charities do the same?

That’s the idea behind a charity I’m working with called GiveGetWin. Except – and here’s the secret sauce – there’s more ways to deliver value than just in dollars.

Essentially, what we do is ask someone doing something interesting to provide us with some value free of charge for us to sell. Often, that’s a handful of 1-on-1 consultations. Sometimes, it’s a product that they usually sell.

In exchange, we market the hell out of the deal and, in doing so, raise awareness of what they’re doing and drive a bunch of traffic to their page. Plus, it looks good on them and raises their credibility.

Great – they’re benefiting personally and doing good for charity.

Eventually, people who are interested in what they are selling find our deal and are amazed by the incredible value. The prices are shockingly low and, in many cases, the offers are things they wouldn’t be able to buy elsewhere.

Great – they’re benefiting personally and doing good for charity.

At the end of the day, all the profits generated by the deal go towards helping change the world. Today, we’re developing educational infrastructure in Mongolia. Tomorrow it could be something different. Because those giving are doing so for their own sake (with the added benefit of helping charity), we aren’t tied to one cause. We don’t rely on sympathy to raise money. Those who give are getting something for it. And this gives us the freedom to spend the money however it’s best suited to generate the most value.

Coincidentally, despite all this, we have an awesome team of volunteers and are able to give 100% of all our earnings to charity. But the point is that, the way things are set up, nobody would have that negative gut feeling if we reinvested our proceeds in growing. The transactions don’t consist of trading money for the feeling that you’ve created change. The change is an awesome byproduct of mutually beneficial deals.

And I haven’t even told you the best part. My job? Well, I do a lot of things. But a main portion of that is finding people who are doing cool stuff that I admire and reaching out to them. I explain how we operate, spend some time chatting with them about how we could structure a deal, and work with them to put something amazing together. It’s an awesome opportunity to connect with really incredible people and I consider myself lucky to be able to do it.

Great – I’m benefiting personally and doing good for charity.

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Written by Zach Obront

zachobront

Zach Obront manages recruitment and development and GiveGetWin, a new kind of charity for the 21st century. You can read more of his writing at www.zachobront.com and find out more about GiveGetWin at www.GiveGetWin.com.

 

Guest Post: The Story of NationWares

You all know by now that I got my start in fundraising in the Annual Giving Call Centre at Wilfrid Laurier University, and I will always have a soft spot in my heart for Phonathon programs.  One of the reasons why I loved that experience so much was meeting all the people I did; my fellow supervisors, full-time professional fundraisers working in Annual Giving and adjacent departments, and – most of all – the student callers.  Amie Mariana Sider is one of those former callers who I feel truly proud to know.  Though I haven’t seen her in a while, I’ve been able to keep up-to-date on her life through social media, and it occurred to me one day that she’d be a fantastic guest blogger for What Gives.  When I reached out to her she generously accepted my invitation, and I am so excited and proud to share Amie’s guest post below.  Be inspired, excited, and spurred to action by Amie’s words.  Enjoy!!!

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Disclaimer: Brace yourselves readers, this is gonna be a long one. I’ve always been a rambler, but I think for this post it’s totally necessary for you to understand my context, background, and reason for doing what I do.  Hopefully it can encourage and inspire you to join in, or simply rekindle your love of giving and doing good.

My name is Amie Mariana Sider and for some crazy reason I’m one of those 25 year old kids who somehow ended up landing their dream job at an absurdly young age with relatively no official experience. What turned out to be a huge qualifier was my unofficial expertise that came to me by growing up among a family of do-gooders, world changers, humanitarians, and international development gurus. At the age of 10 I had already traveled to more suffering and impoverished nations than fancy beach resorts. I forgot to mention that I was also born in an extremely remote and impoverished area of Guatemala and was blessed enough to escape the cycle of poverty by being adopted into an incredibly loving Canadian home.

Since the delicate age of 5, I have vocalized my determination and passion to truly change the world and end the cycle of poverty for those who deserve a chance to escape it just like I did. From then on I volunteered, participated in countless fundraisers, donated savings from my piggy bank, and searched for the best way that I could to bring about change for the world’s most marginalized and vulnerable people. 15 years later during my student career at Wilfrid Laurier University, NationWares was born.

As a Sociology and Global Studies major, I was determined to come up with some revolutionary idea to eradicate poverty. I’ve always understood charity and charity/development work, but was always drawn to the overwhelming success of the business industry. Let’s be honest here, I was a sociology major because math and numbers terrified me and I vowed to my grade 10 math teacher who promised not to fail me if I agreed to never set foot in another math course again in my entire life… which brings me to my third year global studies course.

The Global Studies department created a program called the Global Studies Experience; it was through this mandatory program that I was personally assigned a placement with a development agency. The agency was directed to give me a mandate to fulfill as a lowly summer intern who had yet to be jaded and discouraged by charity, the international development system, and of course organizational bureaucracy. Their mandate for my summer work involved none other than numbers, data collection, and of course fundraising… basically everything related to numbers and financial accountability that terrified me. To put the cherry on top of it all, they wanted me to target and grow financial resources from “young people”. I thought for sure that I was way over my head!

That summer I traveled to Ethiopia to visit some incredible programs in the area of life skills, vocational training, and income generation. I was so encouraged to see men and women become self-sufficient through these programs and instantly wanted to integrate this model into my summer project. At the time I knew that child sponsorship programs were becoming a model of the past for the younger giving generation, donors of all ages were also becoming more and more skeptical, and in tough economic times the average person looks out for their own interests. Most young people may find it difficult to part with their cash for donation purposes, especially when they feel they won’t receive anything tangible from their gift. I’ve always had a passion for fashion, beauty, and accessories, which led me to combine life skills, income generation, and the creation and distribution of ethical fashion and accessories. You can take a look at one of my first projects in the video below. It features a couple who have been able to change their economic situation and support their family by making scarves to be sold through NationWares in North America as they also produce local traditional clothing to be sold in their own community.

NationWares – Scarf Production from bottledmedia on Vimeo.

Let’s skip ahead 5 years. To say that I learned a ton during the first 4 years of operating NationWares would be an understatement. I tested out the charity model to find that it simply wasn’t enough. It needed to be set firm on a foundation of business and since I have a love/hate relationship with business I needed NationWares not to focus on profit and numbers in a self-interested way, but take the whole triple bottom line concept of people, planet, profit, and push it further. That’s why today NationWares is a social enterprise (a business that exists to serve a social cause) that is breaking the cycle of poverty for multiply marginalized people around the world who have been impacted not only by poverty, but also disability, HIV/AIDS, and other factors that lead to marginalization and vulnerability.

I built NationWares to use fashion as a vehicle to drive sustainable employment for over 2,000 current beneficiaries in 10 different countries as they create ethical products that positively impact their society, the economy, and the environment as we expand their market and share their products with North Americans. Our programs go beyond fashion and fair trade as we provide vocational training, creative education, and mentorship resources through the NationWares International Foundation to ensure sustainability and overall success. By purchasing any of our unique products, our customers transform the lives of those deemed the most marginalized and help us create recognized business people, local heroes, and community leaders.

That’s my personal and NationWares journey as a young entrepreneur in a nutshell. To those who find themselves wanting their dream job in the field of giving and doing good I can’t stress the importance of volunteerism and risk taking. The most rewarding jobs don’t always have the most rewarding salaries (or may not even come with a salary at all). Be ready to innovate, get messy, and challenge the system. To all the givers out there, I encourage each of you to give in whatever capacity you can. Any form of giving is great! If you’re a supporter of charity, continue to support charity. If charity doesn’t sit well with you, don’t use that as an excuse not to give; find something you believe in. Businesses usually get a bad reputation but a lot of them are becoming more concerned with the planet and its people under the umbrella of social responsibility. NationWares profits bring sustainable change and help keep the cycle of employment moving. Find companies like us that use their products and profits to do good things and invest in the greater good for all people and societies around the world.

Time to get giving!

 

Written by Amie Mariana Sider
You can connect with Amie via:
Twitter
 & you can stay updated on NationWares via:
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